Correlation Between MGE Energy and Centrais Electricas
Can any of the company-specific risk be diversified away by investing in both MGE Energy and Centrais Electricas at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MGE Energy and Centrais Electricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and Centrais Electricas Brasileiras, you can compare the effects of market volatilities on MGE Energy and Centrais Electricas and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MGE Energy with a short position of Centrais Electricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and Centrais Electricas.
Diversification Opportunities for MGE Energy and Centrais Electricas
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MGE and Centrais is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and MGE Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MGE Energy are associated (or correlated) with Centrais Electricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Electricas has no effect on the direction of MGE Energy i.e., MGE Energy and Centrais Electricas go up and down completely randomly.
Pair Corralation between MGE Energy and Centrais Electricas
Given the investment horizon of 90 days MGE Energy is expected to generate 1.31 times more return on investment than Centrais Electricas. However, MGE Energy is 1.31 times more volatile than Centrais Electricas Brasileiras. It trades about 0.28 of its potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about -0.22 per unit of risk. If you would invest 9,169 in MGE Energy on August 27, 2024 and sell it today you would earn a total of 1,245 from holding MGE Energy or generate 13.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGE Energy vs. Centrais Electricas Brasileira
Performance |
| Timeline |
| MGE Energy |
| Centrais Electricas |
MGE Energy and Centrais Electricas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGE Energy and Centrais Electricas
The main advantage of trading using opposite MGE Energy and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, Centrais Electricas can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Centrais Electricas will offset losses from the drop in Centrais Electricas' long position.| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
| Centrais Electricas vs. Genie Energy | Centrais Electricas vs. Central Puerto SA | Centrais Electricas vs. Korea Electric Power | Centrais Electricas vs. Empresa Distribuidora y |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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